Airbnb: Could your property work harder?
Short-term holiday lets have changed the way many people travel, with sites like Airbnb offering diverse options for accommodation across the world. Airbnb started as a small company pitching spare rooms to budget travellers in 2008. It now has over 4 million active hosts, and was valued at well over $100 billion in 2022.
With the popularity of ‘staycations’ continuing to increase, many looking to maximise potential revenue streams, letting out unused rooms, annexes, or second homes through Airbnb presents an attractive option.
Airbnb is initially very attractive as it doesn’t charge you to list a property and provides a platform to millions worldwide. The site only charges you once the property has been let, taking a percentage of the total rental price. The fee is typically 3%.
The profitability of your Airbnb will be affected by a multitude of factors such as demand in your locality, the type of property you are marketing and your costs to manage and maintain the property. On average, hosts earn £650 a month, making Airbnb rentals a top choice for supplementing income.
There are tax advantages letting through Airbnb, providing the property qualifies as a furnished holiday let. To qualify, the property must be in the UK or EEA and be let with a view to a profit. Longer term lets of 31 days to the same person must not accumulate to over 155 days a year. The property must be available for let for at least 210 days a year and must be rented for at least 105 days a year. Such qualification could see the property benefit from a number of reliefs across the three main taxes of income, inheritance and capital gains.
Whilst the benefits of letting an Airbnb might currently be self-evident, it is important to monitor the direction of travel for the requirements to let a short term holiday let. Presently, it is possible to let an Airbnb without obtaining planning permission, however, this is quickly changing in many parts of the world, including the UK.
In Scotland, the law surrounding short term holiday lets recently changed, with Edinburgh becoming its first control area. By 1 July 2024, all Scottish hosts will require a licence. Similarly, the Welsh government has just concluded a consultation on amendments to planning law concerning short term holiday lets. Proposals follow a similar pattern to the Scottish licensing scheme.
Essentially, recent changes in Scotland and Wales aim to curb the number of short term holiday lets in areas where the Local Authority deems there to be an oversupply and a consequential lack of available (affordable) properties.
Following the devolved nations, it is unsurprising that the Short-term and Holiday-let Accommodation (Licensing) Bill, concerning England, passed its second reading on 9 December 2022. The Bill aims to give Local Authorities the power to require licences for the conversion of domestic properties into short-term and holiday-let accommodation and allow Local Authorities to fine for non-compliance or remove such licences when conditions have not been met.
It remains to be seen how far reaching the requirement to have a licence will be if indeed it does become law in England. In any event, it is important for landlords to keep abreast of developments as the ramifications of a rejected application, or indeed failure to apply, could be significant, as witnessed by the Scottish regime where failure to obtain a licence could result in a 2 year wait before being able to take bookings again.
Thus, whilst Airbnb rentals provide a good source of revenue for those with spare rooms or properties, it is likely that the benefits will be diminished in the decades ahead as the supply of housing becomes increasingly squeezed.